Bangladesh debate: Bangladesh gears up for growth

The country faces many challenges as it prepares to make itself the global growth leader of tomorrow, not least in infrastructure, capital-market development and up-skilling its workforce. Part of the solution is to make itself more attractive to foreign investors.

• Barriers to that include poor infrastructure
and low-skilled workers

• Bangladesh has won awards for bottom-up
development

• Now is the time for top-down solutions

• The government wants to open 100 special
economic zones

• Privatization successes so far include the
power sector

Euromoney Bangladesh’s economy
is performing well, growing at between 6% and 7% on a regular
basis and set to pass more than $200 billion in size during the
current fiscal year. What can be done to convert strong growth
into quality growth: the sort that attracts new foreign direct
investment?

AMM The challenge is to push economic
growth to a higher level. We have been stuck at an average of
6.2%, 6.3% for the past 15 years, and moving out of that
bracket is the challenge. One headwind that has been removed is
the political uncertainty, which gives me hope that the economy
will grow at more than 6% in the current fiscal year to June
2016. Our longer-term target is 7%, which should be realistic
in the next full fiscal year. One of the impediments to
investment is that there are so many licences and approvals
needed to secure land or get permission to build a factory. We
are getting better at apportioning land in export-processing
zones (EPZs) and special economic zones (SEZs). There are 44
public-private partnerships either approved or in the process
of being built, ranging from hotels and highways to high-tech
parks and port terminals. But we need to attract more
investment and more skilled workers into those zones –
that is the key to our economic future. On the plus side, tax
revenues have risen by an average of 10% a year over the last
six years.

AR, Bangladesh Bank Our latest five-year
plan envisages an 8% growth path. For that, we have prioritized
power, energy, infrastructure and land management. The
government has already launched the first 10 of our planned 100
privately run SEZs. Under-construction mega projects –
expressways connecting Dhaka with the port city of Chittagong;
the Dhaka metro; the deep-sea port – will transform
our infrastructure. Let me share some good news: exports are
growing by 8% a year, defying global gloom and a strong
currency, and outstripping our regional peers, all of which is
a testament to our competitiveness. Foreign direct investment
is rising, as companies relocate factories from China,
Thailand, Japan and elsewhere. We expect FDI to make up a
quarter of total investment in the coming years. Remittances,
now running at $16 billion annually, comprise 8% of GDP,
supporting domestic demand and laying the foundations for
social inclusion.

MAK, Summit This is an amazing time for the
domestic private sector. Materials – copper, metals,
plastics, materials to build power plants – have
become so inexpensive. But we face some challenges. First, we
need to educate our workforce: to create a generation of
skilled workers able to take the economy to the next level.
Second, we need to cut the taxes we levy on business. A 37%
corporate tax is not a reasonable tax; nor is a 20% dividend
tax or a 30% personal income tax.

MA, FBCCI The world’s big
multinationals are coming here. Their fears surrounding
Bangladesh’s erstwhile political unrest are more
or less over. But we need to make it easier for companies to
list shares in their firms, both domestically and overseas, and
to be able to decide when they want to pursue a listing.
Business people want to be able to pay their taxes far more
simply and easily, preferably online. The process should not be
a chore. That is one cancer eating away at Bangladesh, the
other being how to deal with the level of non-performing loans
in the banking sector.

SH, City From my conversations with local
and foreign customers, I can tell you that 8% to 9% annual GDP
growth is considered realistic and sustainable. But we do see
the low rate of investment in infrastructure as a key
impediment to growth. Bangladesh needs to spend $100 billion
over the next 10 years on infrastructure, including $7.4
billion to $10 billion each year until 2020 on power grids,
roads and water supplies – sourcing capital from
government and from local and foreign private investors
– to bring those services up the level required to
service our growth momentum. We should target sourcing a
quarter of all capital injected into PPP [public-private
partnership] projects from external sources; for that to
happen, foreign investors will need to see a certain level of
infrastructure already in place.

The PPP Authority of Bangladesh has identified 39 PPP
projects worth $10 billion, with another $15 billion-worth in
the pipeline over the next five years. But we are always
looking for ways to get more private local and foreign
investment involved. It’s vital to note that FDI
is about more than just equity; it’s also about
the transfer of technology and standards; improving compliance
to international standards; and improving corporate and project
governance.

We have a genuine demographic dividend in play –
the average age of our workforce is 24 years – but we
need to convert this workforce into a technologically skilled
set of workers, and that requires more investment in
education.

Foreign investors want to see facilities in place before
they put their cash to work, along with skilled workers, good
vocational training, and better infrastructure. Bangladesh may
be a bright spot in the emerging world, but we need to
consolidate our strength, usher in more FDI, improve our
sovereign rating further, and improve our position in the World
Bank’s Doing Business rankings.

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